Regional Gas Market Outlook:Growth vs. Constraints

Maine Natural Gas Seminar -“Natural Gas: Where Do We Go From Here?”

Tom KileyNortheast Gas Association

October 6, 2016Falmouth, ME

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Continued on NGA web site…

http://www.northeastgas.org/about-nga/antitrust-guidelines 2.

About NGA

Non-profit trade association

Local gas utilities (LDCs) serving New England, New York, New Jersey, Pennsylvania

Several interstate pipeline companies

LNG importers (Distrigas, Repsol) and LNG trucking companies

Over 250 “associate member” companies, from industry suppliers and contractors to electric grid operators

www.northeastgas.org 3.

4.

Two Trends…

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Growth Constraints

• Extensive U.S. resource base

• System expansion potential

• Continuing power generation demand

• Siting, and environmental opposition

• Power market conundrum

Context for Growth

6.

Sour

ce:

U.S

. EIA

, 7-1

4

Strong, “Nearby” Production

7.

U.S. natural gas production in 2015 set new all-time record: 79 Bcf/d.

Marcellus Shale producing ~18 Bcf/d.

PA is now 2nd largest gas producing state in U.S.7.

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Gas Projected to be a Leading Fuel in Coming Decades in U.S.

Source: U.S. EIA, “2016 Annual Energy Outlook,” 5-16

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Gas Customer Base in Region Continues to Grow

Natural Gas = +840,000 Heating Oil = -1.4 Million

Continued Growth in Regional Design Day, and New Peaks

• New England’s gas utilities set a new collective peak in Feb. 2015, and set 2 new peaks on 2 consecutive days in Feb. 2016.

• Gas LDC design day for this recent winter was 4.5 Bcf, reflecting system growth

• 2013/14 winter design day collectively was 4 Bcf

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Projected Power Sector Additions by Fuel Type

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Natural Gas, 53

Other, 7

Wind, 40

GENERATOR PROPOSALS IN THEISO NEW ENGLAND QUEUE

Percentage, Sept. 2016

0

1,000

2,000

3,000

4,000

5,000

6,000

Natural Gas Dual Fuel Wind Other

NEW YORK ISO SYSTEM, 2016Proposed Power Projects by Fuel Type

Megawatts

PJM, 2015Queued Capacity by Fuel Type,Percentage

Gas = approx. 65%

Key reason: natural gas replacing coal in U.S. electric power plants.

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Carbon Emissions are Down in U.S. Energy Systems

Source: U.S. EIA, 5-16

Northeast States Lead U.S. in Gas Efficiency Investments

9 Northeast states = $544 million investment in 2015

Equal to 39% of U.S. total of $1.4 billion

Source: ACEEE, “2016 State Energy Efficiency Scorecard”, released Sept. 201613.

Gas LDCs are committing to infrastructure investments

Gas utilities in the Northeast are investing in proposed pipeline projects – to meet gas utility demand. State regulatory and legislative support exists for gas system expansion in several states.

But supply access, and infrastructure development, still needed in region.

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Constraints

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Changing Differential,Gas vs. Oil

16.Source: Federal Reserve Bank of Dallas, July 2016

Growing Opposition to Gas Infrastructure

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Meanwhile… Projects are Advancing… Elsewhere

Source: U.S. EIA, 2-16 18.

Two Views

Strong market potential:– Robust, secure gas resource base– Growth potential & customer interest from homeowners,

businesses, power sector– Improving environmental performance

Headwinds:– Gas still has good price position with oil, but narrower than in

recent years – Siting, and increasing opposition to infrastructure– Market and regulatory uncertainty

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View from Here: New England’s Projected Future Energy Mix

20.

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.60020

1420

1520

1620

1720

1820

1920

2020

2120

2220

2320

2420

2520

2620

2720

2820

2920

3020

3120

3220

3320

3420

3520

3620

3720

3820

3920

40

Qua

drill

ion

Btu Natural Gas

Petroleum

Coal

Nuclear

Renewables

Projected Growth in Consumption by Fuel Type, New England, 2014- 2040

Source: U.S. EIA, “2016 Annual Energy Outlook,” 5-16

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For Further Information

Tom KileyPresident & CEO

Northeast Gas AssociationTel. 781-455-6800, x. 110tkiley@northeastgas.org